The problem is not that there is not enough credit...

[kentuck]

The problem is that there is too much credit.

Not only amongst the bankers of the country but amongst the individuals as well. People are in debt up to their eyeballs and are not looking for credit. They are looking for relieve from credit. They are looking for more money in their pockets so they can pay down some of their credit. The credit "freeze" is amongst those that can no longer afford to buy anything else on credit.

The entire premise of this banking crisis is false. They say we need to loosen the credit. It is frozen. But we do not need to "loosen" the credit. We need to create jobs and put more money in the pockets of people that are already have too much credit so they can pay down their debts and once again be able to purchase products, cars and houses, etc, on credit.

It is all a farce.

[leftstreet]

1. Anyone who currently qualifies for a loan can get one

You're right, it's all a farce.

[dkf]

2. I think it is more credit to Business that is frozen though.

Consumers are affected one credit card by one credit card, but Business can't get funding to buy inventory and all the other stuff they need.

[kentuck]

4. That may be true to some extent....

but I do not think that is a problem that is widespread. Personally, I have heard of one business, in construction in California, that could not get the credit they needed. Businesses are laying off workers not because they can't get the credit to expand, it is because of lack of demand from the consumers. The lack of demand is caused by too much credit by consumers. Without consumers, businesses cannot survive. Put money at the bottom and it will find its way to the top.

[Hannah Bell]

25. Make it two, then. relations' biz (w/ good earnings history, good credit, etc.)

couldn't get their usual credit line to buy new inventory, the owners had to pool their $ & buy it out of pocket.

sells motorcycles, skidoos, that kind of thing.

[napi21]

3. Many businesses large & small can't! The banks are not lending

for various reasons. Some of it is the mortgages they hold either outright or in an investment package at this time can't be valued, and they're running scared. //////////they're mandated to value their assets at market value and they don't know what it is. Another reason is that they scared of the business sector market. What if they lend $$ to a business and the economy continues to fall? Their creditor won't be able to pay the payments. The third problem is because of restrictions to maintain a certain amount of reserves, and again because of the "toxic assets" they can't lend any money.

This admin. is working at solving all these problems, but it won't happen over night!

[Selatius]

5. You are right, but what you propose will demand an uncomfortable confrontation.

Creating jobs and putting money into the pockets of people may require a level of wealth redistribution that the financial elite do not favor. A lot of wealthy people now possess assets that "cannot be valued" because they have been poisoned by fraudulent securities pushed by their hotshot buddies on Wall Street. They would rather the taxpayer absorb the costs of removing those bad assets from their balance sheets than be forced to pay for their greed by giving up some wealth to resuscitate an ailing economy and giving people the jobs with incomes adequate to pay off the bills and keep up with inflation.

[kentuck]

7. And the people believe it is to their benefit...

rather than their detriment, to clean up the books of these big banks, by buying all their bad assets. But there is a price to pay. No one has figured it out yet. Will it be hyper-inflation or will it be huge cuts in social programs? We will pay dearly.

[leftofthedial]

6. credit is meaningless in today's America. It is the problem, not the solution.

We need a complete paradigm shift, not a propping up of the rotting corpse of old-school raygun economics.

[Truth2Tell]

8. As long as we can get those AIG bonuses back

everything will be fine.

[rcrush]

9. I want some of those rainbow mushrooms.

plz share thnx

[Truth2Tell]

30. Ask Geithner. I hear he's holdin'. nt

[w4rma]

10. Yup. Regular Americans need money. We don't need more credit.

If we regular Americans have money then there will be no credit freeze on *anything* because everyone will be scrambling to loan people money.

[Manifestor_of_Light]

11. ANYBODY can get a loan??? I got turned down for NO REASON.

I have a house I need to sell. I got a HELOC last year for $30K for new floors and paint.

That is about 8% of the value of the collateral (the house). They will get paid when I sell the house.

I talked to the V.P. Rectum at the bank. I said I needed a loan of ONE PERCENT ($3,500) to tide me over until I sell the house.

He said, "Well we need to check. You have to wait a year before you can renew." I took it out in Feb. of last year so my year was already up.

This jerk never gave me a coherent reason why he refused to authorize a loan. There was no reason.

He was worried about my income being next to nothing. I don't have income but I have this large piece of collateral sitting there.

And the nice lady who is the president sounded like she would loan me more money. She said they could loan up to 80% of collateral value - I asked her.

I think this rectum wouldn't do it because he COULD say no just to be cruel. He's a real jerk. He said "Obama scares me".

I don't know why the President says one thing and the VP says another. I think he just doesn't like me -- it's personal animosity and he's a Republican asshole who has never been overeducated and unable to find a job, like some of us Baby Boomers (A.A.S., B.A., J.D. here).

:wtf:


After I sell the house and they get paid, I am taking my business elsewhere.

:wtf: :wtf: :banghead:

[ColbertWatcher]

12. The problem is that credit in America is a farce.

When we have predatory lenders gouging people for rates that are criminal.

Why is it that Third World countries can get reasonable rates for loans (http://nobelprize.org/nobel_prizes/peace/laureates/2006/press.html">Graemeen Bank) but billion-dollar, multi-national, off-shore corporations can legally rob Americans into poverty?

[Oregone]

14. Even prime loans aren't too wonderful in the States

People here in Canada can get a 2.5% refi right now, that will last for at least 3 years (as long as they go variable, but prime isn't rising anytime soon).

[ColbertWatcher]

15. I did not know that. n/t

[Oregone]

16. They haven't been available long

Hell, some developers are financing at 1.99%. There seems to be a rapid response to the rapidly dying real estate market here, and the economy as a whole.

For example, BC is just a tad bigger than my old home state, Oregon. Yet their individual stimulus bill is over 5X as large ($800+ million compared to $175 million). As much as they bitch and moan here about the response being too small to the crisis (which is smaller here), they aren't fucking around in my opinion.

On edit: nevermind...the $800 million must of been their last budget or something. Just noticed their stim is $14 billion on infrastructure in next 3 years (not sure if that includes federal matching too). Regardless...they are only a tad bigger than Oregon, for example.

[ColbertWatcher]

17. It may have something to do with whose currency is stronger. n/t

[Oregone]

18. Not really....

BTW, I edited that out to include their real stimulus ($14 billion over 3 years). Yeah, that Can is 80 cents on the dollar. That doesn't make up the difference. :) They have serious problems coming up but are serious about addressing them in a Keynesian manner (a term even their conservative prime minister evoked on CNN).

[ColbertWatcher]

19. The Looney is no longer stronger than America's dollar!?

USA! USA! USA!

LOL!

[Oregone]

20. Haha, that was an insane bubble...

They let it float freely to control exports and inflation. It basically went up this summer with the price of oil and commodities they export (probably restricting exports and controlling rampant growth or some crap I can't fully grasp).

Im much happier now. Last week I had almost a 30% buying advantage with my dollar.

[ColbertWatcher]

21. So, does Canada plan on staying with their dollar?

Have they considered going Euro?

[Oregone]

23. No, not that I am aware of...

I think they really like their dollar because it helps them engineer the economy appropriately and tailor growth (http://www.bankofcanada.ca/en/speeches/2006/sp06-9.html). They are also the US's biggest trading partner (both ways), so the main way they can keep any sort of advantage is by having a lower currency (while the Euro is higher) and yet keeping it within a range where imports are not too costly. Altering their currency significantly could disrupt trade with the US and destroy their economy. As far as I am aware, it is here to stay and at about the price many people want it (that being, 85 cents on the dollar). The only problem is Canada is going to have a difficult time keeping their dollar low if oil rises again and foreign investors continue flocking to invest in this stable economy. Though, I don't think you'll see them opting for a Euro or the rumored Amero (or whatever) anytime soon.

This entire period of turbulence will lead to global protectionism and more inner-dependence. You will see some European countries completely getting screwed for adopting the Euro. I don't think the concept of regional currencies (or global currencies) will be more popular in the coming years at all (despite China's little talk).

[ColbertWatcher]

24. You don't think the Euro is doing well?

I thought it was.

[Oregone]

29. It dropped alot...

But some countries with it aren't doing well. Thats the problem. Rather than having their own currency they can devalue, they instead are going to get his with mass deflation. The problem is that not every European economy is the same, yet they are all stuck on the same currency. Europe is going to be having some major issues soon.

[Oregone]

13. Na, the real problem right now is Deficient Demand is caused by investors, banks...

business men and even ordinary Americans being too afraid to spend in the current economic conditions, which reinforces and increases deficient demand in a self-sustaining spiral. That is the real problem, and it leads to long term deflation or stagflation.

Who can blame the average American for not spending? They have little equity and liquid assets, unemployment is rising, and they are afraid (for good reason).

The business owners are cutting back in response to less demand for their services and less available credit. They must make cuts (reinforcing working class fear).

The investors are not spending because, despite having money to invest, they don't see a dime they can profit from doing so currently. Loss is as probable as profit, so for good reason, they sink their money in stable investments like Treasuries (instead of businesses, which creates less of a demand for their services).

And the banks, who are not liquid to start with, but even if they were...if the banks had a dime to lend, they sure as hell aren't going to put it in the pocket of anyone else, because on this financial horizon, loans can likely be defaulted on due to the outright lack of production, and the lack of the promise of future production.

And by the time I finished writing that, more Americans lost their jobs and fear grew causing more cutting back, businesses made cuts due to a loss of further profits and demand, investors withdrew more money for the market and sunk it into Treasuries, and banks became even more insolvent due to their toxic assets up and dying (from people on the bottom defaulting on loans once the businesses cut them off their payrolls).

There is deficient demand, which is a self-sustaining symptom. No one is willing to spend (and some can't even spend) for good reason. The longer this condition exists, the less production there will be, and the more demand will drop. You can not solve this problem by throwing money at the investors and the banks (because it will still be unprofitable to lend). You can only hope that by stimulating demand amongst businesses and ensuring this causes Americans to have jobs and paychecks, that the investors will get off the sidelines.

[kentuck]

27. And people are saving more than in a long time.

Some may have taken money out of their 401K's and put it in savings? The banks are too paranoid to loan and the people are too paranoid to borrow.

For the last 15-20 years, the banks called all the shots. They could charge whatever interest rates they wanted. Many people borrowed out of necessity. Much of it can be traced to credit card debt. But, when their home values bottomed out and they could get no more money, not even enough to pay off their credit cards, then the shit hit the fan.

[ddeclue]

22. Well Said K&R

:bounce:

[GeorgeGist]

26. Feed the Greed ..

remains the bottom denominator of capitalism.

[NMDemDist2]

28. read this Democracy Now! interview, a whole new take on the mess

AMY GOODMAN: It’s good to have you with us. OK, how did we get here? Or how did they get us in this mess?

THOMAS GEOGHEGAN: In the article, I talk—that appeared in Harper’s, I’ve talked about the fact that we’ve not focused enough on the big deregulation that precedes all other deregulations, and that’s the ceiling that has existed on the financial sector since time immemorial on the amount of interest that banks can get from their clients, their customers, their depositors. Historically, and even up through movies like It’s a Wonderful Life with Frank Capra and Mr. Potter and George Bailey, the interest rates in this country were capped at eight percent, nine percent. In the 1970s, we began to deregulate this, and then we had a massive big bang with a Supreme Court case that effectively knocked out all the interest rate caps. And we have today, taken as common, that banks can charge 17, 18, 19, 30, 35 percent, not to mention payday lenders charging 200, 300, 400 percent in states like Illinois, California —

AMY GOODMAN: Tom Geoghegan, let’s go back to that 1978 case, Marquette National Bank v. First of Omaha Service Corp. Explain the significance of it. What was it?

THOMAS GEOGHEGAN: Sure, that’s the Brown versus Board of Deregulation for the financial sector. The case—Justice Brennan, of all people, opinion said that banks that operate—out-of-state banks that were subject to the National Banking Act of 1864, signed by President Lincoln in the middle of the Wilderness Campaign, effectively preempted any state regulation capping the interest rates of those banks when they sent their credit cards in from out of state. Now, back in 1864, banks in Delaware weren’t operating out in Nebraska or handing out credit cards across the country, and there was no such thing as Visa or MasterCard.

The effect of this was that the big national banks were not subject to any state usury law, because the Banking Act of 1864 had no interest rate cap on it, not contemplating the kind of situation that we’re in today. And in effect, this sealed what had been a trend throughout the country, which is lifting these interest rate caps for banks and giving consumers easy credit on the premise that they would just pay tons and tons of interest so that the banks were protected if the loan weren’t repaid. In fact, the banks had incentive to hand out credit cards and hope that the loans would not be repaid, because the interest rates on these credit cards were so high.

You know, if you are Mr. Potter in It’s a Wonderful Life and can only get six percent, seven percent on your loan, you want the loan to be repaid. Moral character is important. You want to scrutinize everybody very carefully. But if you’re able to charge 30 percent or, in a payday lender case, 200 or 300 percent, you don’t care so much if the loan—in fact, you actually want the loan not to be repaid. You want people to go into debt. You want to accumulate this interest. And this addicted the financial sector to very, very, very high rates of return compared to what investors were used to getting in the real economy, the manufacturing sector, General Motors, which would give piddling five, six, seven percent returns.

So the capital in this country began to shift in the financial sector. That’s why the financial sector began to bloat up. That’s why we ended up, by 2006, having a third of all profits going into the banks and the financial firms and not into the real economy...........

more at link

http://www.democracynow.org/2009/3/24/thomas_geoghegan_on_infinite_debt_how